Mitsubishi Chemical : Corporate Governance Report 2021/12/13

Corporate Governance Report

Last Update: December 13, 2021

Mitsubishi Chemical Holdings Corporation

Chief Executive Officer Jean-Marc Gilson

Contact: Osamu Shimizu

General Manager, Corporate Communications Office

Securities Code: 4188

https://www.mitsubishichem-hd.co.jp/english/

The corporate governance of Mitsubishi Chemical Holdings Corporation (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

The Mitsubishi Chemical Holdings Corporation (MCHC) Group defines KAITEKI as "the sustainable well- being of people, society and our planet Earth", and has "realizing KAITEKI" as its vison. The MCHC Group will not stop at providing solutions to environmental and social problems, but also aim to contribute to a sustainability in both through our corporate activities.

For Realizing KAITEKI, in accordance with these guidelines, MCHC shall establish a system to enhance both the soundness and efficiency of business administration, improve the transparency of its business administration through suitable disclosure of information and dialogue with stakeholders, and endeavor to establish a better suitable corporate governance system.

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for basic policies concerning corporate governance such as the roles, constitution and appointment criteria of the Board of Directors.

(https://www.mitsubishichem-hd.co.jp/english/group/governance/policy.html )

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] (Updated)

The contents are based on the Corporate Governance Code revised in June 2021. In addition, the contents for the prime market, which will be applied after April 4, 2022, are voluntarily described in advance.

(Voluntary and measurable goals for ensuring diversity)

With regard to the "voluntary and measurable goals" related to the promotion of women, foreign nationals and midcareer hires to middle managerial positions, the MCHC Group does not currently set the Group's common numerical targets as each Group company conducts recruitment and promotion of managers based on its business strategy in accordance with the MCHC Group's basic strategy and medium-term management plan.

(Concept of ensuring diversity and policies for human resource development and internal environment development to ensure diversity)

Under its medium- to long-term basic management strategy KAITEKI Vision 30, the MCHC Group is aiming to create flexible human resources systems that embrace the diversity, expertise and mobility of its people and has been promoting reforms that are founded on the five pillars.

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[Five pillars that form the foundation for highly accommodating human resources systems]

1. Ensuring pay for job/performance
2. Human resources systems designed according to each type of operation/job
3. Strengthening functions to create skills and minds that can meet global needs
4. The right jobs for the right people globally by using a common platform of talent management
5. Cluster-typeorganizations that enable complex problem solving

Based on the foregoing, we have identified diversity and inclusion as one of the material issues to be addressed by the MCHC Group as part of our current medium-term management plan, APTSIS 25. We have also set the diversity ratio of management as a numerical target for fiscal 2025 and have embarked on corporate culture reforms by initially promoting diversity in a top-down fashion.

[Disclosure Based on the Principles of the Corporate Governance Code] (Updated)

As used in this report, the following terms shall have the following meanings: "senior management" means corporate executive officers.

"officers" means directors and corporate executive officers.

Cross-Shareholdings>

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management])

The Company and major subsidiaries shall acquire and hold shares of clients, etc. if the shareholding contributes to medium- to long-term improvement in corporate value. The Board of Directors shall review the adequacy of such cross-shareholdings on a regular basis. Considering the effect on the market, we make effort to sell such cross-shareholdings as assessed insufficient in adequacy.

On September 16, 2021, the Board of Directors reviewed the adequacy of all cross-shareholdings of Group as of the end of March, 2021, in light of economic rationale as measured by ROIC and necessity for business, etc. As a result of the review, we have found insufficiency in adequacy of a part of cross-shareholdings. Considering the effect on the market, we will proceed to sell such cross-shareholdings as assessed insufficient.

The Company investigates the existence of related party transactions such as transactions involving members of the board or corporate executive officers and their close relatives through methods including seeking direct confirmation from members of the board. The Company sets competitive and conflict-of-interest transactions as a matter to be resolved by the Board of Directors, who confirm the adequacy of the transactions. The Company has no shareholder who holds 10% or more of the voting rights of all shareholders.

In order for corporate pension funds to perform their roles as asset owner, Mitsubishi Chemical Corporation which is the core business company of the Company group has taken measures based upon the guidelines as published by Ministry of Health, Labor and Welfare.

Specifically, Mitsubishi Chemical Corporation has set guidelines for management of pension assets, established committee for management of pension assets, determined proportion of composition of political assets and implemented the total assessment of asset management companies.

In addition to the foregoing, in cooperation with consultants, Mitsubishi Chemical Corporation has performed measures for proper management of corporate pension funds.

(What the company aims for)

The Company Group aims to realize KAITEKI through our corporate activities. KAITEKI is the Company's original concept that means "the sustainable well-being of people, society and our planet Earth." To realize KAITEKI, the Company Group promotes KAITEKI Management with the objective of increasing corporate value based on our three core management policies of improving capital efficiency, creating innovative technologies, and enhancing sustainability for people, society and the Earth with an emphasis on time.

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Please refer to KAITEKI Management on the Company's website for details. (https://www.mitsubishichem- hd.co.jp/english/kaiteki_management/kaiteki/)

(Management plan)

In February 2021, the Company has formulated its new medium-term management plan APTSIS 25, Step 1, which will commence from fiscal 2021. With regard to the impact of the COVID-19 pandemic, the situation will likely remain uncertain. Based on this awareness, the five-year period of APTSIS 25 from fiscal 2021 has been divided into two phases: Step 1 (With COVID-19) and Step 2 (After COVID-19). The principal measures in Step 1 (fiscal 2021 to fiscal 2022) have been formulated. The plan for Step 2 (fiscal 2023 to fiscal 2025) will be formulated in fiscal 2022.

Please refer to the Medium-Term Management Plan on the Company's website for details. (https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01033/01180.pdf)

(New Management Policy)

The Company has formulated a new management policy "Forging the future" and it is disclosed on December 1, 2021.

Please refer to a new management policy on the Company's website for details. (https://www.mitsubishichem-hd.co.jp/english/ir/01168.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/analysts_meeting.html)

(The Company's view on overall corporate governance)

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for our view on overall corporate governance. (https://www.mitsubishichem-hd.co.jp/english/group/governance/policy.html)

(Policy and procedures for deciding compensations of senior management and directors)

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]3(3), [Enhancement of management transparency]5) The Compensation Committee determines the individual amount of compensation for each director, corporate executive officer and major subsidiaries president (excluding listed subsidiaries).

Policy on Determining Remuneration of senior management and directors is [Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods]

(Policy and procedures in the appointment/dismissal of the senior management and the nomination of directors)

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]3(1), [Enhancement of management transparency]4) The Nominating Committee nominates candidates for directors, corporate executive officers and the presidents of major subsidiaries that are non-listed companies (Mitsubishi Chemical Corporation. and Life Science Institute, Inc.). In consideration of transparency and fairness in the process of nominating candidates, an outside director serves as the head of the committee.

Policy on appointment/dismissal of senior management and nomination of directors is described at [Policy on appointment/dismissal of senior management and nomination of directors].

(Reason for the Appointment of Officers)

The reason for appointment of officers are described at the end of this report [Reason for appointment of the Director] and [Reason for appointment of the corporate executive officers].

The MCHC Group works to increase corporate value through KAITEKI Management by implementing the three axes of management of sustainability (MOS), management of technology (MOT) and management of economics (MOE) in an integrated manner.

We work through our value creation cycle aimed at sustainable growth. We start with a focus on environmental and social issues as well as accelerating changes in social needs. We then identify growth business domains where the MCHC Group's business portfolio can provide solutions, in line with our mission and value.

In addition, the MCHC Group's vision toward 2030 under KAITEKI Vision 30 is to solve social issues for a sustainable future through leadership as a global solutions provider, and the Group has formulated its medium-term management plan APTSIS 25 toward achieving such vision. Under APTSIS 25, we have

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identified the material issues to be addressed by MCHC Group and set targets for the material issues identified, with MOS Indices also set to measure progress in order to proceed steadily with initiatives. With regard to the disclosure of the impact of climate change-related risks and earning opportunities on its business activities and profits, MCHC announced its support for the final TCFD recommendations in October 2018. Within the framework of enhanced climate change-related measures, the MCHC Group is working for improved solutions in GHG reduction and carbon cycle, which are among the growth businesses identified in KAITEKI Vision 30, as well as progressing with measures toward achieving the strategy's target for GHG reduction. Progressive enhancement of information disclosure is another initiative which we are targeting to increase our corporate value.

For details, please refer to "Sustainability" and "Report in Line with the Recommendations of the TCFD" on the Company's website and the Company's integrated report KAITEKI Report 2021. (https://www.mitsubishichem-hd.co.jp/english/sustainability/index.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/tcfd.html)(https://www.mitsubishichem-hd.co.jp/english/ir/library/kaiteki_report.html)

The Company delegates authority to corporate executive officers to make all business execution decisions, with the exception of matters that must be legally resolved by the Board of Directors and important matters in terms of portfolio management.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines Attachment 2)

Independence Standards for Independent Directors are described at [Matters relating to Independent Directors].

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]2(2))

In order to establish the Group's basic management policies and oversee management appropriately, Directors who possess an advanced level of knowledge and deep insight in management experience, finance and accounting, science technology, IT and production, risk management, business strategy and marketing, laws and regulations, etc., and globalism and diversity are appointed.

Furthermore, in a bid to enhance oversight functions, a majority of Directors of the Board will not concurrently take on the role of Corporate Executive Officer.

Regarding the skills matrix described above, please refer to the Notice of the General Meeting of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

Regarding the Directors of the Board's concurrent positions, please refer to the Notice of the General Meeting of Shareholders.

(https://www.mitsubishichem-hd.co.jp/english/ir/pdf/01079/01234.pdf)

- Implementation of the Board of Directors Effectiveness Evaluation

In accordance with the Mitsubishi Chemical Holdings Corporate Governance Guidelines, the Board of Directors is evaluated for their effectiveness annually and a summary of the results are disclosed.

- Evaluation methods and processes

In FY 2020, the evaluation was conducted by an independent external review organization by inspection of the minutes of meetings of the Board of Directors, the Corporate Executive Officers Committee, the Nominating Committee, the Audit Committee, and the Compensation Committee, collecting responses from all directors including the chairperson through a questionnaire (answers using a 5-point scale and written comments), interviewing each director for about one hour, and providing an evaluation based on the reviewer's professional knowledge. Based on such results, the Board of Directors discussed the issues that

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should be addressed and future challenges. Based on these discussions, the Chairperson reported the issues that should be addressed and future challenges to the Board of Directors.

- Outline of evaluation results

The findings from the evaluation of the Board of Directors' effectiveness conducted by the independent review organization are briefly described as follows.

1. The effectiveness of the Board of Directors is secured in terms of a structural framework, as is shown in such fact that the scheme of a "company with a nominating committee, etc." defined in Japan's Companies Act is adopted. However, some critical issues are found in terms of the substance.
2. • Many directors have pointed out that the effectiveness as a holding company's board of directors is not sufficiently secured, and they have advocated the necessity of clarifying the roles of the Board and redefining the agenda.
3. Efforts to address the issues identified in the previous year's effectiveness evaluation brought improvements in some issues. However, some other issues have not been sufficiently addressed, as is clear from harsh comments given by some outside directors. Their comments pertain to discussions on roles as a holding company, prior distribution of board meeting materials, and other problems.
4. Since the mission of increasing corporate value of the Mitsubishi Chemical Holdings Corporation is to be entrusted to a new CEO recruited from outside, enhancing the effectiveness of the Board of Directors, as the supervisory body of the CEO, is an urgent critical issue. Therefore, the Company is expected to address the following four issues, among others.
5. • Redefining the roles of the Board of Directors and redesigning the agenda
   • Encouraging directors' leadership
   • Revisiting the composition of the Board of Directors
   • Reinforcing the function of director nomination

Based on the evaluation findings described above and ensuing discussions by the Board of Directors, The Company is going to take action toward redefining the roles of the Board of Directors and the agenda, revisiting the composition of the Board of Directors and further reinforcing the function of director nomination.

[Outline of results of the Evaluation on the Effectiveness of the Board of Directors in fiscal 2020] is described at the end of this report.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines [Development of a framework that improves the soundness and efficiency of management]4(1))

MCHC shall explain to outside directors the Group's business contents and organization on a continuing basis, and provide opportunities to visit domestic and overseas business sites as well as opportunities for dialogue with the management on a regular basis.

For internal directors, opportunities to develop qualities suitable for directors shall be provided through external seminars held by various organizations, in addition to trainings on compliance and internal control.

(Mitsubishi Chemical Holdings Corporate Governance Guidelines Attachment 1)

MCHC will ensure appropriate disclosure so as to gain the trust of our shareholders and encourage long-term holding of MCHC's shares. MCHC also intends to engage in active dialogue with shareholders and reflect it in our corporate activities.

(Policy on Dialogue with Shareholders)

Disclosure to and dialogue with shareholders shall be implemented by each relevant department, in cooperation with each other, under the supervision of the President, officer in charge of IR and officer in charge of legal. Opinions obtained through the dialogue will be reported to the Board of Directors, etc., and shared by the management.

Please refer to our "Mitsubishi Chemical Holdings Corporate Governance Guidelines" on the Company's website for our Policy on Dialogue with Shareholders. (http://www.mitsubishichem- hd.co.jp/english/pdf/governance_guidelines.pdf)

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